In June this year HBO aired a new documentary film called Hot Coffee. This documentary shows how corporate America and the insurance industry helped orchestrate the perceived “law suit crisis”. The McDonalds’ case is perhaps the most frequently cited case in the argument for tort reform and limits on damages that can be awarded to injury victims. Most people believe the case is about a greedy coffee drinker who spilled coffee on herself and won millions of dollars for no apparent reason.

Many of the jurors I encounter bring up “frivilous lawsuits” and the “McDonald’s case” as evidence of what’s wrong with the legal system and to a certain extent America. However, few people know the actual details surrounding the injuries suffered by the victim and the decisions McDonald’s made which could have prevented those injuries.

The actual facts about this case are that on February 27, 1992 , sevety nine year old Stella Liebach was a passenger in her grandson’s car and bought coffe through a drive-through window at McDonald’s. McDonald’s served it’s coffee significantly higher than the industry standard . When she opened her cup to add sugar she spilled the coffee on her lap. Ms. Liebach had to undergo numerous skin-grafts to her thigh and groin area. She sufferred permanent scarring on more than 16 percent of her body. The evidence revealed that McDonald’s had ignored more than 700 similar complaints of scolding burns from their coffee, many of which involved children. The corporation even ignored a request from a non-profit burn institute to to lower the temperature of their coffee. The company elected to assume the risk of potential burn claims based on their marketing data which suggested they would sell more coffee and thus make a much greater profit by selling the coffee at a higher temperature.

Initially Ms. Liebach asked McDonald’s to pay for her $11,000 in medical bills but they refused. As her bills increased to over $20,000 she hired an attorney. In an out of court mediation a mediator recommended a $225,000 settlement , however, McDonald’s refused and the case went to court. The jury awared Stella $200,000 for her injuries but also awarded $2.7 million in punative damages based upon McDonald’s behavior. The jury was thoughtful and came up with that figure because that is what McDonald’s earned in 2 days of coffee sales.

What most people don’t know is that although McDonald’s annual profit at the time exceeded one billion dollars the trial judge reduced Ms. Liebach’s award to $480,000. McDonald’s balked at paying this amount and threatened a lengthy and costly appeal. Stella therefore eventually settled for a confidential amount that is believed to be well below the already reduced $480,000 final award.